{"id":3639,"date":"2020-11-03T07:00:41","date_gmt":"2020-11-03T07:00:41","guid":{"rendered":"https:\/\/way2vat.com\/?p=3639"},"modified":"2020-11-03T07:00:41","modified_gmt":"2020-11-03T07:00:41","slug":"why-has-my-13th-directive-claim-been-refused-part-2","status":"publish","type":"post","link":"https:\/\/way2vat.com\/why-has-my-13th-directive-claim-been-refused-part-2\/","title":{"rendered":"Why has my 13TH directive claim been refused? \u2013 PART 2"},"content":{"rendered":"

In Part 1 of this series<\/a>, we looked at reasons why VAT\\GST claims are refused, and concluded that organisations which operate in certain sectors (e.g.\u00a0 Financial services, Insurance, Health, Education etc.) may be unable to recover all or part of their VAT\\GST and will often face restrictions to recovery of VAT\\GST claims.<\/p>\n

Another very common scenario we often see is where a business (including those not operating in those sectors) organises hotel accommodation for its employees\u2019 business trips to the European Union (\u201cEU\u201d). Alternatively, a US business may decide to hold its annual employees\u2019 conference in a European capital which involves flights, accommodation, catering, tours, event management etc.\u00a0 The most obvious thing would be for the business to contact its corporate travel agent who will organise everything.\u00a0 If the travel agent doesn\u2019t have EU experience this could be a mistake and result in the business losing significant amounts of VAT\\GST.<\/p>\n

Chances are that if you buy hotel accommodation from a travel agent directly there won\u2019t be any VAT\\GST charged on the invoice.\u00a0 Purchase the same hotel room directly from the hotel in the EU and you will be charged VAT\\GST.\u00a0 You may think that travel agents don\u2019t get charged VAT\\GST, but this would be a mistake.<\/p>\n

To explain, lets take a brief detour.\u00a0 The chances are that a non-European travel agent will buy in the accommodation etc. from a travel agent located in the EU.\u00a0 The EU operates a special scheme called the tour operators\u2019 margin scheme, also known as TOMS.\u00a0 This applies to businesses that buy in and re-sell travel, accommodation and certain other services.\u00a0 Under TOMS, businesses account for VAT\\GST on the margin (or profit) they make on the supply.\u00a0 Use of TOMS prevents the need for travel agents to register and pay VAT\\GST in each EU member state a customer travels to and was introduced as a simplification relief. \u00a0More importantly, as a result, a travel agent operating under TOMS may not issue an invoice separately showing the VAT\\GST. As we know no VAT\\GST invoice = no VAT\\GST recovery.<\/p>\n

Contrast this with a business traveller who stays in an EU hotel and pays for the room directly to the hotel. Upon request the hotel will raise an invoice showing VAT\\GST.\u00a0 The business employing the traveller can then submit a 13th<\/sup> Directive VAT\\GST claim and recover the VAT\\GST.<\/p>\n

Are we suggesting never to use a travel agent or event organiser for EU travel or events?\u00a0 No!\u00a0 Good travel agents and event organisers will be aware of the issue and can still provide their services and allow businesses to recover VAT\\GST.\u00a0 They do this by acting as a disclosed agent between hotels, caterers etc. (suppliers) and their customer.\u00a0 They arrange for the supplier to issue an invoice to the end customer showing VAT\\GST, and the customer can then use this invoice to recover VAT\\GST.\u00a0 The travel agent makes a separate charge for its agency or organisation services \u2013 such services should normally be without VAT\\GST if the customer is located outside the EU.<\/p>\n

Of course, this means that travel agents, event organisers will need to disclose their profit margins.\u00a0 Clearly some agents will be nervous of this, but many travel agents or event organisers in the know are used to this and businesses acknowledge the additional value a good travel agent or event organiser adds and are happy to pay for this.<\/p>\n

It is worth noting that a travel agent operating under TOMS still gets relief for VAT\\GST on costs since it only pays VAT\\GST on the margin.\u00a0 Using a travel agent who operates as a disclosed agent, does somewhat lower the cost of VAT\\GST on the agent\u2019s commission or margin.\u00a0 In addition, it ensures that there are no nasty surprises regarding the possibility of recovery of VAT\\GST.<\/p>\n","protected":false},"excerpt":{"rendered":"

In Part 1 of this series, we looked at reasons why VAT\\GST claims are refused, and concluded that organisations which operate in certain sectors (e.g.\u00a0 Financial services, Insurance, Health, Education etc.) may be unable to recover all or part of their VAT\\GST and will often face restrictions to recovery of VAT\\GST claims. Another very common […]<\/p>\n","protected":false},"author":1,"featured_media":3640,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[26,1],"tags":[],"class_list":["post-3639","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-blog","category-vatgst"],"acf":[],"yoast_head":"\nWhy has my 13TH directive claim been refused? \u2013 PART 2 - w2v<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/way2vat.com\/why-has-my-13th-directive-claim-been-refused-part-2\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Why has my 13TH directive claim been refused? \u2013 PART 2 - w2v\" \/>\n<meta property=\"og:description\" content=\"In Part 1 of this series, we looked at reasons why VATGST claims are refused, and concluded that organisations which operate in certain sectors (e.g.\u00a0 Financial services, Insurance, Health, Education etc.) may be unable to recover all or part of their VATGST and will often face restrictions to recovery of VATGST claims. 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